The Message From Gold And Treasuries: "This Time Is Different"

Tyler Durden's picture

The last forty years have seen five distinct regimes in the relationship between gold prices and Treasury yields. It would appear that the current regime (from 2006 to Present) is 'different' indeed as the Keynesian end-point seems to have arrived.

The 5 'Correlation' Regimes of Gold and Treasury Yields...

Regime 1 - 1971-to-1980 - highly correlated with rising Treasury yields and rising Gold prices

Regime 2 - 1980-to-1986 - completely anti-correlated: very dynamic, as rates rose so Gold fell and as rates fell so Gold rose

Regime 3 - 1986-to-2002 - highly correlated with falling Treasury yields and falling gold prices

Regime 4 - 2002-to-2006 - highly correlated with rising Treasury yields and rising Gold prices

Regime 5 - 2006-to-Present - completely anti-correlated with falling Treasury yields (to record lows) and rising Gold prices (to record highs)...


Charts: Bloomberg

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JamesBond's picture

when you see crosses like the regime 5, duck and cover



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Pinto Currency's picture


Printing money and buying your own bonds works until it doesn't.

nope-1004's picture

Agree.  The word "ponzi" doesn't do it justice.  More like FRAUD than a ponzi.


Vagabond's picture

We could be undergoing hyperinflation and Krugman would still say we need to print more and get more government spending.

derek_vineyard's picture

japan circa 1989 to present w/ twist  (domestic deterioration, eat external inflation)

MillionDollarBoner_'s picture

Same goes for printing money and buying short Gold ETFs ;o)

vast-dom's picture

The Austrian School in action. Printing and distorting interest rates (yields) will ALWAYS end in DISASTER! Distort credit and savings and you are biding time in your distortions for that which you are avoiding in the first place, multiplied by many factors. 

ATM's picture

Or in other words, you bring upon yourself that which you most fear.

DoChenRollingBearing's picture

So much correlation and then negative correlation hints to me that gold and Treasury yields are not correlated at all, at least over a longer term.

There NEVER seems to be a correlation that we can make money off...

LowProfile's picture

DCRB, you need to think about it in a broader context of confidence, manipulation, and confidence in the success of the TPTB's future manipulation.  Cheers, LP

Thomas's picture

Counting on return of correlation when treasury yields start rising.

NotApplicable's picture

Can't happen. Dependence on ZIRP will ensure the system self-destructs first.

Which will be the day everyone suddenly refuses to accept dollars as payments for goods and services.

MillionDollarBoner_'s picture

which is the day you better be holding physical

sosoome's picture

Well, self-destruction likely to be triggered by higher interest rates. Panic out of $ into gold. Correlation resumes.

But I think there will be an overnight re-set before we get there.

Either good for gold.

midgetrannyporn's picture

when the price of gold breaks down correlation will return.

nope-1004's picture

... because the economy is so robust and growth imminent?  LOL.

More like treasuries will spike once the IRS derivative complex is exposed as a shell game.


Bay of Pigs's picture

Have you noticed the anti gold crowd is increasing again here at ZH?

Reminds me of 2008 when gold fell from over $1000 to $690. Same old worn out arguments too.

akak's picture

All we need to complete the PM-bashing crowd here is a zombie gold-hating JohnnyBravo/MasterBates returning from the grave and the reincarnation of MethMan with his incessant anti-silver bleating "only $5 to dig from the ground!".

seek's picture

Either trolls or sockpuppets. ZH is becoming pretty high profile (I now routinely see it linked to in other news aggregators, some of them close to mainstream) and has a penchant for pointing out the emperor has no clothes. Given those two, I'm sure ZH is attracting both commerical and government "truth squads" with sock puppet accounts. I really hope Tyler has someone looking for this in the logs, is just to know the size of the problem.

I also think it'd be awesome to out them someday. This happens on a regular basis on reddit, notably with military and the US lobby arm of a particular country.


midgetrannyporn's picture

the gold and silver bugs are never wrong because they whine like bitchez when the price goes down.

Mr_Wonderful's picture

Yeah, yeah the death of the dollar and the crash of the bond market have been just around the corner for as long as I remember. Now, the price of govt. debt is at a 200-year high and the dollar´s demise remains elusive. Same old.

rich_wicks's picture

If you were holding a ton of dollars or bonds, what would you be doing?  Attempting to crash it?

China wants to accumulate resources with their surplus, they don't want to drive those resources up nor so they want to reduce their purchasing power.

The question to ask yourself, is that given that nobody is being prosecuted in our financial sector (Jon Corzine, Franklin Raines, Angelo Mozillo, Dick Fuld, Bob Diamond, etc), shouldn't it be obvious to you it's nothing but a smash and grab free for all?  Fiat systems require trust.

Bay of Pigs's picture

Funny you would post that particular link and site. Whining? Hardly. Jesse is very rational in his commentary and chart work.

And you? Try a five or ten year chart Einstein.

midgetrannyporn's picture

I know, gold only goes up just like houses. LMAO!

Bay of Pigs's picture

So you're a top caller then? Is THAT your point?

Okay, got it mental midgetrannyporn.

rich_wicks's picture

The only thing that goes up consistently, is US debt.

It grows at 9.4% a year.

Meanwhile, US tax revenue as a percentage of the national debt has gone from about 50% in 1980 to where it stands now - 16%, and it's declining.

Duh, I wonder what the end result will be?  I know, a strong dollar!

PiratePawpaw's picture

When my gold and silver drops below 3x what I paid for it, then I'll worry. Right now I'm quite happy.



When I do decide to sell; do you think I should put it into Greek Bonds, Spanish Bonds or FRN's?

DebtSlaveZombie's picture

Good point.  And in 2008, when gold should have been a "safe haven" asset, it wasnt.  The dollar was.  You are making the point that all people arguing against gold in the short term are making.  Gold is a commodity.  When fear and panic strike, people will seek safety in what they know.  The dollar.  The reserve currency.  The only true liquid currency on the planet when times get bad.  Cash, not gold eagles, will be sought.  Now, long term, yes, gold will be the place to be.  But 2008 is only a preview of whats to come.  That was the "red flag" that we are over the event horizon and tumbling into the world wide currency collapse abyss.  But, it will take years for this to play out.  Not at Jackson Hole in August, or when Greece leaves the Eurozone, or when China growth collapses.  It will be a slow motion train wreck, and gold will touch 800 - 1000 range again before going higher.  When banks/cities/countries start defaulting on debts, creditors will seek what assets they can obtain in exchange for that debt.  Commodities will be on that list and prices will have to be adjusted to take into account firesale transactions.  Gold/Silver/Copper volitility will be huge.  So, yes, gold will go higher over the next 5 years, but in the next 12 months, who knows... I wouldnt be surprised if it was $1000 by Christmas and I wouldnt be surprised if it was $2000 either.  But one thing is for sure.  No asset class is safe.  The dollar, in the near term, is.  Capital preservation at this point.  Everything else is too much risk.

Bay of Pigs's picture

you really dont know much about gold, do you?

BurningFuld's picture

Are you retarded?  I bought Gold Bullion in 2008 at 768.00 an ounce and 823.00 an ounce. I have doubled my money currently. I'm sure everyone else here has doubled their money playing the market since then...or by holding USD since then right? Right?

Tegrat's picture

Actually, one of our accounts had been flat for the 10 years in the market. I switched to 100% TIPS in 2010 and that account has tripled.


MeelionDollerBogus's picture

How does 2008 revoke safe-haven status for gold? It kept getting bought and it kept going up in price. A higher 2007 price does not break safe-haven status.

Mr_Wonderful's picture

They can´t rise or the entire system will collapse under the weight of insurance contracts that insure its survival. The bond market has been saying this for the last 25 years and is very unlikely to change its stance any time soon. The system is very stretched at this point, the FED is leveraged 60-1 against its capital and so on. So, everything will continue to be about very low interest rates.

CrazyCooter's picture

Hmmm, so if the dollar tanks (FedReserve), does the coinage (Treasury) still hold up or do they go with the fiat?



Lost Wages's picture

Is another generation of yuppie scum about to die?

Mr_Wonderful's picture

Notice the exact trading channel in treasurys since ca. 1985. I think the 10 yr. yield will eventually be bid down to almost zero.

Mr_Wonderful's picture

Well, the price of govt. debt is slightly below a recent 200-year high. There is certainly some blood left in that cow. Give it maybe three years or so. The 10 yr. should eventually stall at .25 to .50%. Or who knows, maybe it´ll go negative. It has certainly been a very consistent and strong bull market.

orangegeek's picture

Gold shows bearish in the context of elliott wave.  Gold bugs index appears to be leading gold too.

Bay of Pigs's picture

I guess you missed the charts above?

Or are you just trolling?

akak's picture

Most likely, yes and yes.

Dr. Engali's picture

I certainly don't like the looks of chart number one. It sure makes gold look like a top.

SheepDog-One's picture

Sure as far as 'priced in dollars'.

Bam_Man's picture

An intermediate top, more than likely.

New highs - at many multiples of the 2011 top - will be reached when (not if) loss of faith in paper/electronic  money & markets occurs. Give it another year or two.


Paper sucks, you Wall Street fucks! I'll see you vampires in the sun, with my loaded silver gun. Yer goin' down in flames, from Lower Manhattan to the Thames. Your paper is I know not where, I'd rather shit my underwear! For, be there bull, or be there bear, silver is the suit I wear! (With gratitude, and apologies to Dr. Seuss.)


The only paper I own is the stuff I wipe my ass with. Market paper is worthless, because I cannot do a good job of wiping my ass with it. Gold was worth $28.00 an ounce when I was a kid. Silver was worth whatever was printed on the coin you spent. Any one think those days are coming back? All of the lying bum fucking aristocracy of the Age Of Paper Power can burn in their paper suits soonest. I won't even bother pissing on them to put out the flames.
I collect gold, silver, lead, copper, real dry powder, food, tools, diesel fuel, and other useful commodities. There is a community of folks all doing the same, so skill sets and extra eyes and hands can guard each others sixes, and "break on through to the other side, break on through to the other side, YEAH
HFT ain't good for me. 

Credit defaults far as the eye can see.

CDS's gonna make some messes.
Boo hoo hoo as thieves confesses.

TBTF gonna fall off a cliff - REAL NEAT.

Wall Street is a bunch of fucking dead meat.


Banks used to be so overleveraged bold. Now, they're layin' bankrupt,dead and cold.

Gonna be nothing but prepper people, all the rest gonna be surprised fucked up Sheeple.

God bless this mess.

I must confess. I'm a fucking poet,


and didn't even know it.



RagnarDanneskjold's picture

So back to regime 2? When yield's rise it will be part of the mother of all U.S. dollar rallies, the last bull market for the pre-New U.S. dollar.

Diet Coke and Floozies's picture

Anyone think this is the mother of all wedges?

Bam_Man's picture

I got the mother of all wedgies at summer camp in 1979.